Media News

Australian Businesses Rushing to Embrace Social Media

30 Apr 2010

The social media phenomenon that has swept Australian consumers has been vigorously embraced by the corporate sector, with the number of organisations using social media almost doubling in the last two years, a new study by Nielsen Community Engine Research has found.

The inaugural Nielsen-Community Engine 2010 Social Media Business Benchmarking Study found that 70 per cent of all Australian businesses intend conducting some form of social media activity this year, compared with just 40 per cent in 2008.

The Australian-first study, commissioned by social networking technology company Community Engine and conducted by research company Nielsen in February and March this year among 347 organisations, sought to determine, for the first time, how businesses were using, budgeting for and measuring social media.

The study found that many businesses are actively moving a significant percentage of marketing budgets out of traditional media into social media. The greatest shifts of budgets were out of print media (47 per cent) and direct marketing (33 per cent).

Social media has become an important tool for organisations who also recognise that they risk failing to connect with a significant online constituency if they do not incorporate social media in their marketing.

However, the study found that many businesses are struggling with how to measure return on investment (ROI) in social media. For example, 29 per cent said they had either not measured ROI from their social media activity or did not know how to.

Community Engine managing director, Piers Hogarth-Scott said the study was the first in-depth look into the way Australian organisations are engaging with social media. The results, he said, had "substantial implications" for business. "This study reveals that corporate Australia has not just woken up to social media, but has seized on it as a vitally important addition to their marketing and business toolbox," Hogarth-Scott said.

"And as traditional media becomes less effective in connecting with and engaging stakeholders, it makes sense for funds to be redirected into social media and, importantly, having control of their social media ecosystem and the ability to track and measure it."

In the SME sector (less than 100 employees), growth in the uptake of social media has been even stronger. In 2008, just 32 per cent of SMEs used social media - a figure that has more than doubled to 67 per cent in 2010.

More than three quarters of large businesses (100 or more employees) plan to engage in social media in 2010 compared with just over half two years ago.

More than half of large businesses had allocated funds away from traditional media to fund social media - a trend thrown into the spotlight last month when budget airline Jetstar announced its decision to redeploy 40 per cent of its marketing budget to social media.

Print, direct marketing and even other online/digital marketing activities are the main targets for budget redeployment, according to the study.

Twenty-one per cent of big businesses said they would expand their marketing budgets in 2010 to fund social media, but this figure is almost double among SMEs at 40 per cent.

Among organisations wholeheartedly engaging in social media, the majority say they will allocate between 5 and 20 per cent of their marketing budget in 2010 to social media.

"These are very significant figures," Hogarth-Scott said.

"When you consider what a newcomer social media is to the marketing arena, for companies now to be saying they'll put up to a fifth of their marketing budget towards it is a remarkable development."

According to the study, 50 per cent of businesses agree that if they do not employ social media they risk losing touch with their customers, a figure even higher at 62 per cent for big businesses.

More powerful still was the belief that organisations should now be asking "how" to do social media, not "if" they should do it. A total of 63.5 per cent of all respondents agreed with this view.

When considering "how to do" social media, businesses are looking seriously at extending their presence beyond third party platforms such as Facebook, Twitter and YouTube by creating their own proprietary social media networks and communities.

Although 26.5 per cent of Australian businesses now have a Facebook presence (17 per cent on Twitter, 10 per cent on YouTube and 5 per cent on MySpace), the study revealed a high level of concern about ownership and control issues around third party social media platforms and their impact on customer relationships.

More than a third of big businesses and 27 per cent of SMEs said they would prefer to create their own social network as an extension of their own website. A total of 77 per cent of businesses say the reason for this preference is the importance of owning the information they capture through their social media activities, as opposed to the information they derive from third party platforms.

A fifth of respondents say they will look at creating their own social network.

"The really smart companies are recognising that instead of putting all their social media budgets into the likes of Facebook and MySpace, they should be allocating funds to establishing their own proprietary social networks to provide them with the best possible insights, and a more connected environment with their customers and other stakeholders," Hogarth-Scott said.

"And unlike TV, print, direct marketing and radio - which are generally short term campaign based activities - proprietary social networking creates a long term strategic asset," he added.

Melanie Ingrey, research director of Nielsen's online division said: "In the past year, there has been substantial growth in the number of consumers engaging with companies via social media, up from 23 per cent in 2008 to 38 per cent in 2009.

"Australian organisations cannot afford to overlook social media as a highly effective means of engaging with their customers and stakeholders," she said.

More than half, or 54 per cent of organisations, said they either already had a formal social media strategy in place, or were developing one this year. According to the study, the most important marketing objective for businesses using social media is brand building, followed by customer feedback and engagement, as well as word of mouth communication among customers.

The difficulty of measuring ROI or uncertainty how to establish KPIs for social media were perceived as barriers to entry by 34 per cent of respondents.

Among big businesses, 42 per cent also said the fact that senior management had not yet "bought into" social media was a barrier to their organisation investing in it.

"Like all new marketing channels it's to be expected that there will be uncertainty among some businesses in the short term over with how best to gauge the effectiveness of their investment in it. But measurability and industry standards will develop. The internet is, after all, the most measurable of all media" Hogarth-Scott said.

"What's important is that the vast majority of businesses now know that without any investment in social media marketing, the ROI from their marketing spend across all media could be significantly diminished," he said.